Sadly, FT Alphaville’s New York wing couldn’t make it to this year’s Societe Generale-run bear sighting in London — the bank’s Global Strategy conference starring Albert Edwards and Dylan Grice (who’s off to the buyside).

But we did hear that Albert had called European stocks “unambiguously cheap”. It’s a “once in a generation” buying opportunity, and so on. Is Albert, no longer a equities bear!?

So we turned to his latest Global Strategy note on Tuesday. It’s a bit more subtle, actually:

Despite remaining maximum underweight equities myself (for another leg in the secular equity valuation bear market), I am starting to think the move by institutions away from equities has gone too far. Solvency, regulatory, and asset/liability modelling arguments are forcing institutions into a sub-optimal asset allocation – and one from which they have no intention of reversing. Institutions are investing heavily in bonds which they fully recognise might collapse as QE continues apace, but this will be matched by a similar reduction in liabilities (i.e. the solvency risk of being wrong on overweighting bonds is lower than overweighting equities). As equities over the next few years become the cheapest for a generation, they will be even more shunned. What an incredible opportunity this should then represent for defined contribution schemes and retail investors.

What Albert is talking about, then, is the way in which falling equity prices might push defined-benefit pension fund investors to reduce exposure to the asset class even further, rather than go looking for bargains.

To put it another way, you might predict that the effects of low bond yields on the liabilities side would propel a DB pension fund which is in deficit into stocks. Actually — says Albert — nervousness surrounding the ability to meet projected liabilities would push a manager out of stock volatility. QED, “drawdown risk has become the asset allocators’ new mantra” and that means overweighting bonds. Albert shows us this chart via Andrew Lapthorne:

So there you are. Although Albert’s having it both ways on the attraction of stocks here. Isn’t he?

Related link:
Albert Edwards coverage - FT Alphaville